Signature International Bhd (SIB) is disposing of three contiguous industrial lots in Negeri Sembilan for RM54.57 million cash to purchase raw materials for existing and newly-secured property development projects and to pare down its debts.
Its wholly-owned subsidiary, Signature Realty Sdn Bhd has entered into three conditional sales and purchase agreements (SPAs) with Ace Logistic Sdn Bhd for the sale of the industrial lots at RM43.50 per square foot.
The proposed disposal is a related party transaction, SIB said in a filing with Bursa Malaysia.
SIB is 31.2 per cent controlled by developer Chin Hin Group Bhd, which is a major shareholder in Chin Hin Group Property Bhd.
According to SIB, the industrial lots are located within an industrial park in Bandar Baru Enstek in Seremban called Techpark @ Enstek Phase 2.
Bandar Baru Enstek is an integrated and self-contained township. Developments in this township include shop offices, terraced houses, semi-detached homes, and public amenities.
SIB, Malaysia's largest kitchen cabinet and wardrobe manufacture said in the filing that its investment in the three lots is RM37.7 million, and the purchase was made in September 2014.
The land was acquired for the future development of a new manufacturing facility that was expected to take up about 28-acres of space, with the balance land held for long-term investment purposes.
However, the expansion plan did not materialise and the land remained vacant.
The proposed disposal provides an avenue for SIB to realise its investment in these non-core assets at their market value, and raise cash proceeds which can be channelled towards the company's business operations, it said.
SIB said the current selling price at RM54.47 million represents the market value of Bandar Baru Enstek Lands as appraised by an independent valuer and is a premium of RM13.63 million or 33.3 per cent to the total audited NBV of the Bandar Baru Enstek lands.
The company proposes to utilise RM34.1 million of the proceeds to repay part of the existing bank borrowings of the company and its subsidiaries, which amounted to about RM41.5 million as at June 30, 2020.
It said the proposed repayment is expected to result in annual interest savings of about RM1.6 million based on the interest rate of 4.59 per cent per annum for the term loan.
SIB said that RM18.9 million will be allocated for working capital to purchase raw materials such as aluminum and glass for several projects such as Bukit Bintang City Centre (Parcel 2 S1), Setia Sky Seputeh, Damansara Town Centre (basement and retail podium and skylight), Merdeka PNB 118, Warisan Merdeka Mall and Oxley Towers Kuala Lumpur City Centre.